Labour market shows signs of cooling, but wage growth could be concern for Bank of Canada

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Canada unexpectedly lost 6,000 jobs in July, Statistics Canada reported on Aug. 4. Find out more.

Economists had expected employers to add 25,000 jobs last month, while forecasting the unemployment rate to match the headline print.

Average hourly wages climbed higher from a year earlier, rising to $33.24, an increase of five per cent after rising 4.2 per cent in June and 5.1 per cent in May. Wages are outpacing the rate of inflation, which was 2.8 per cent in June and 3.4 per cent in May, something Bank of Canada policymakers will be watching closely. Steady gains in incomes are likely to make it difficult to bring inflation down to the central bank’s two-per-cent target.

Alberta Central chief economist Charles St-Arnaud said in a client note that the Bank of Canada will welcome a slowdown in job creation, but wage growth may be cause for concern. “The higher unemployment rate, while still historically low, suggests some slack in the labour market is slowly being created,” said St-Arnaud, who was a former economist at the central bank. “However, wage growth remains disconnected from weak labour productivity.”

A sharp rise in wage growth in July is estimated to have pushed the three-month annualized wage rate up to 6.1 per cent, suggesting “further acceleration” in wage growth. “Whether the pattern continues in August will matter,” St-Arnaud said.There was an error, please provide a valid email address.By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc.

 

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